A Private Retirement Scheme (PRS) is an investment scheme designed to help employees and self- employed workers to accumulate savings for retirement through voluntary contribution It is administered by the Private Pension Administrator (PPA) whose trustees holds the PRS assets for the benefit of contributors. The PRS funds are managed by 8 providers namely the Affin Hwang Asset Management Berhad, AIA Pension and Asset Management Sdn. Bhd., AmFunds Management Berhad, CIMB-Principal Asset Management Berhad, Kenanga Investors Berhad, Manulife Asset Management Services Berhad, Public Mutual Berhad and RHB Asset Management Sdn. Bhd. The PRS funds are distributed or sold through sales agents, bank branches, Fundsupermart.com etc.
Core Funds vs. Non-Core funds
PRS fund managers or providers offer at least three Core funds, or mandatory funds. This is comprised of conservative fund, moderate fund and growth fund. These core funds are classified as default group or those voluntary contributions whereby contributor did not specify where the funds will go; investment in equities and investments in fixed income securities. Each core fund has varying features. On the other hand non-core funds or those other funds that does not fall to any of the core funds can be offered depending on the provider. However, all PRS funds can only be invested in transferable securities, cash, deposits and money market instruments, shares in collective investment schemes, derivatives and real estate to ensure security.
Benefits of contributing to PRS
Supplementary Savings. Private Retirement Schemes essentially operates like a supplement to the Employees Provident Fund. With the rising living costs, the average savings may not be adequate in order to support the needs of a retiree. The PRS helps to alleviate financial encumbrance of retirees.
Low investment Cost. PRS funds have minimal to no sales charge so retirees can enjoy their full savings. Initial contribution is as low as RM100 and succeeding contribution is RM50 per fund.
Flexibility. Since contributions are voluntary, there is no fixed amount or intervals of contribution required. Contributors can select, switch or change plans and providers at their discretion subject to conditions from providers.
Convenience. Regular contributions can be made automatically through a Regular Savings Plan and all PRS concerns are centralized in the Private Pensioner Administrator (PPA), who also provides for transparency.
Tax relief. To promote PRS savings, the Malaysian Government provided a tax relief of up to RM3,000 per year on PRS contributions. Moreover, profits derived from PRS are tax exempt.